Foreign insurers are less optimistic than a year ago on expanding their presence in the Chinese market as regulatory restrictions and the robust expansion of domestic peers may stifle growth, according to a recent survey by accounting firm PricewaterhouseCoopers (PwC).

Foreign insurers expect their share in the Chinese life insurance market to grow to just 8 percent over the next three years, compared with the 10 percent market share they forecast in a year ago survey.

Foreign life insurers saw their market share falling after clocking an all time-high of 8.9 percent in 2005. The share slumped to 4.7 percent in the first six months of the year.

The situation for foreign property and casualty insurance companies is more challenging than life insurers. They accounted for just 1 percent of the market in the first half, after staying around 1.2 percent in the previous five years. These firms now expect to achieve a 2 percent market share by 2012.

"Local competitors' capabilities in market exploration and their firm footing in China have been underestimated by insurers from abroad, in particular during the financial crisis," Tom Ling, PwC's partner for assurance sector, said yesterday.

The survey of senior executives from 20 foreign life insurance firms and nine property and casualty insurers showed that established domestic insurers are the main threat, followed by other foreign peers and bank subsidiaries.

"Last year was a difficult period for foreign insurers in China because the large domestic firms have proved more resilient to the (economic) slowdown versus their foreign competitors," said Peter Whalley, PwC leader for insurance industry.

China Life Insurance Co, the country's largest life insurer for instance, has just extended its pension arm into Shanghai in August to vie for shares in the corporate annuity market.

PwC's survey said that most of the respondents felt that their domestic peers are becoming more innovative and are improving their operations.

Against such a backdrop most of the foreign insurers have now decided to pay more attention on achieving profitability from sales, and expand organically.

Most of the life insurers (15 out of 20 firms) felt that their annual premium growth would be around 30 percent in 2012.

The most significant challenge for foreign firms comes from the bancassurance channel, as it will introduce new dynamics, said Shu-Yen Liu, PwC's leader for Actuarial Practice, Asia.

(China Daily September 2, 2009)